Because of reduced funding, school districts across the state are facing teacher layoffs, class-size increases and elimination of programs as officials try to come up with more ways to cut spending.

In a cheery classroom decorated with posters exhorting students to "Dive into a Good Book," four first-graders, who are struggling to read, recited words ending with the "ang" sound -- bang, rang, sang, fang, gang. The Foothill Ranch Elementary School students used their index fingers to trace the letters into squares of felt and carpet, imprinting the connection between the letters and the sound into their minds.

The Language Arts Assistance Program has helped a generation of struggling youngsters in this Orange County suburb become skilled readers. But it, along with sports teams, small classes and school librarians, may vanish next year as Saddleback Valley Unified School District officials trim $13 million in spending for the upcoming school year.

Under the budget approved by the state Thursday, schools and community colleges will be forced to cut $7.4 billion from their budgets this year and $3.2 billion next year. And a $787-billion federal economic stimulus package that is expected to send billions to school districts isn't enough to backfill deficits, educators say.

"It doesn't look good for us," said instructor Tina Hatch, 52, who teaches the reading program designed for pupils in first, second and third grades. "It's very sad because these kids definitely will fall through the cracks if there's not a program like this."

Because of reduced state funding, school districts across the state are dealing with such difficult decisions. They have been cutting spending annually in recent years, but prior trims -- slimming the administrative staff, cutting back on maintenance, reducing the cleaning schedule -- were mostly invisible to students and parents.

But now, in many places the low-hanging fruit is gone, and educators are left with painful cuts that reach directly into classrooms, including widespread teacher layoffs, increasing class sizes and the eliminations of music, sports and other programs that are not mandated by state and federal law. And that includes Saddleback's reading-intervention program.

"You're very definitely going to feel the pinch in the classroom because there's no place else to go anymore," said Saddleback Supt. Steven Fish, whose school board also is considering closing a neighborhood elementary school and trimming its International Baccalaureate program. "The list isn't long enough. I need more."

The state budget offers school districts greater flexibility to spend so-called categorical funds, which in the past have been earmarked for such specific items as textbook purchases.

Funds earmarked for limiting class sizes in kindergarten through third grades, however, were preserved for that purpose, a victory for the teachers unions and a blow to some local district officials who had been calling for greater flexibility in using that money.

An earlier proposal by the governor to shave five days from the school year was eliminated from the final package but will probably be raised again in the spring.

"This budget will result in real cuts to real students in the classroom," said Jack O'Connell, the state superintendent of public instruction. "These reductions will be felt and seen."

A spokesman for Gov. Arnold Schwarzenegger said given the state's fiscal crisis, state officials did the best they could to protect students.

"Probably more than any other sector of the budget, we went to great lengths to ensure that K-12 schools and community colleges had the greatest amount of flexibility and relief possible in what is the worst budget year in memory," said H.D. Palmer, state deputy director for external affairs. "By definition, closing a $41.6-billion budget gap is going to create difficult decisions. We tried to minimize how difficult those decisions were for" schools.

In Los Angeles Unified, the state's largest school district, officials expect to slash about $800 million in spending for the next 18 months. District officials have yet to disclose how they expect to close this budget gap, but it is hard to imagine a scenario that won't affect the district's nearly 700,000 students. Layoffs are likely.

"I will be recommending cuts the likes of which this district has never seen," said Supt. Ramon C. Cortines at a recent meeting.

Teachers must be warned by March 15 if they will face layoffs, but already districts have decided to send more than 12,000 pink slips to tenured and probationary teachers across the state, the most ever seen this soon before the deadline, said David Sanchez, president of the California Teachers Assn.

The budget, he said, "was balanced on the backs of the students of the state of California."

In Hayward, school trustees voted earlier this month not to participate in the state's class-size reduction program and will boost class sizes in kindergarten through third grades, from the current maximum of 20 students per teacher to between 30 and 34 pupils per class. The move will allow the district to eliminate 120 teachers, saving $2.7 million annually.